China eyes India's slot as top outsourcing hub

PTIJul 22, 2007, 02.58pm IST

NEW DELHI: India, which has emerged as the back-office of the world in recent years, is expected to face stiff competition from countries like China, Malaysia and Singapore even as the global outsourcing industry is pegged to reach a market size of $1,430 billion by 2009-end.

A survey conducted by global consultancy firm Frost and Sullivan has ranked India as the top destination for shared services and outsourcing (SSO) across various verticals. The country is followed by China, Ireland, Singapore, Malaysia, Mexico, Czech Republic, Poland, the Philippines and Canada.

Low labour costs and abundant supply of skilled manpower are the key factors behind India's sustenance as the top outsourcing destination globally. Outsourcing sector in India is experiencing consolidation and SSO providers are moving up the value chain, expanding their onshore presence to strengthen global delivery capabilities, the report said.

But there is a threat from countries like China which is fast emerging as an attractive destination for outsourcing IT, research and development and procurement services, it added.

India's growth is beleaguered by factors like high attrition rates, poor infrastructure, rising wages and appreciation of rupee against US dollar, the report said.

The study also forecasts the global SSO market will grow at a compound annual rate of 15 per cent to reach a market size of 1,430 billion dollars by end-2009.

Malaysia, which boasts of excellent infrastructure and low attrition rates, also makes for an ideal outsourcing hub, the Frost and Sullivan study said. The south-east nation is already a strong player in banking, financial services and insurance (BFSI), transportation and energy verticals.

Besides, companies such as Dell, Satyam and IBM have recently made outsourcing investments in Malaysia, making it a hub catering to the technology sector, it pointed out.

A report by audit firm PricewaterhouseCoopers (PWC) has also said although India remains the most favoured destination for outsourcing, countries like Singapore were gaining favour.

A number of financial services companies, including Barclays and Credit Suisse have expanded their support operations with the Monetary Authority of Singapore actively promoting the country as a financial centre.

"Service providers are gaining domain specific capabilities to move-up the value chain. This trend is expected to boost further consequence to decreasing cost arbitrage, increased competition, and the relentless search for value," Bhat said.